Question 82: If the divided properties were real estate being mortgaged for a loan at a commercial bank or credit institution, how should the properties of the spouses be divided?

For the properties that are real estate, being mortgaged for loans at commercial banks when requesting a Court to settle this division of such common properties between spouses in a divorce case, there are 02 cases which need to be considered as follows:

Case 01: Both the spouses agree on the mortgage of a loan at the bank, the division of properties upon divorce shall be conducted as follows:

This real estate is the common property of the spouses. The spouses’ agreement to mortgage this real estate to the bank gives rise to a common obligation of the spouses during the marital period from such mortgage and loan transaction. Therefore, the spouses take responsibility for the full repayment of the loan to the bank as well as other obligations related to the mortgage and loan as mentioned above. During the divorce, the spouses can negotiate with the commercial bank on the loan settlement as well as the transfer of rights and obligations of the spouses involved in the loan. In case the spouses cannot reach an agreement and/or that the commercial bank disagrees with the spouses’ agreement, the Court will settle on the basis of the rights and obligations of the spouses’ properties over a third party. In particular, the above real estate is still being mortgaged to secure the loan from the bank, and cannot be divided until the spouses fulfill their obligations to the bank relating to that loan.

Case 02: One of the two spouses is unaware of the mortgage loan at the bank.

If the loan is used for the purpose of meeting the family’s essential needs, according to Article 37.2 of the Law on Marriage and Family 2014, this is a common obligation and the obligation of payment of the debt must be fulfilled by both spouses in the divorce.

If the above loan is used by the borrower, for purposes unrelated to the family’s essential needs or to create separate private properties of the spouse during the marital period or for the purposes of serving the illegal acts of a spouse – a borrower, this loan will become a private property obligation of the borrower and this person is obliged to pay the debt to the bank.

One thing to note is determining as to whether the mortgage transaction, in this case, is considered to be invalid. If this mortgage transaction is invalid, the spouses must re-negotiate the mortgage discharge of the above-mortgaged properties to divide such properties upon divorce and replace them with other mortgaged properties belonging to the borrower’s ownership. And the spouse who borrows, in this case, must fulfill his or her obligation to repay the debt to the commercial bank[2].

It is highly unlikely that a spouse is unaware of the real estate mortgage at the bank. Since real estate constitues common properties of the spouses, it will often be registered under the names of both the spouses, as the mortgage will require the spouses to confirm and sign. In the hypothetical scenario where both the spouses agree that only one of them will be named in the land use rights certificate and ownership of the houses and all other assets attached to land, then the bank may request a marriage registration certificate of the spouses to determine the date of ownership of the morgaged properties. If it is a private property, there must be a written agreement towards the property of the spouses. Thus, in such a case, thanks to the bank’s professional function, it is easy for the bank to contact the other spouse to confirm the mortgage transaction.

[2] Article 131 of the Civil Code 2015.

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